Labor Unions, Bargaining Power and Corporate Bond Yield Spreads: Structural Credit Model Perspectives
47 Pages Posted: 17 Mar 2010 Last revised: 30 Dec 2010
Date Written: February 22, 2010
This study investigates labor union effects on bond yield spreads from perspectives of structural credit models by employing American bond observations from 2001 to 2007. This research finds that union strength significantly and positively relates to bond yield spreads (This effect is roughly equal to that of issuer rating for one standard deviation change when controlling for well-known variables). The empirical results also show that the positive effects become weaker when management has higher bargaining power. Additionally, union strength volatility significantly and negatively relates to bond yield spreads and capital structure (leverage). The above results are robust when controlling for credit ratings, collinearity concerns, industry effect and tax effect.
Keywords: Labor union, Bargaining power, Credit risk, Bond yield spreads
JEL Classification: G33, J52, J53
Suggested Citation: Suggested Citation